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WASHINGTON -- Republicans are calling it "Taxmageddon," the big tax increase awaiting nearly every American family at the end of the year, when a long list of tax cuts are scheduled to expire unless Congress acts.

It would be, GOP leaders in Congress say again and again, "the largest tax increase in American history."

Except it wouldn't be, not when you take into account population growth, rising wages, and most importantly, the size of the U.S. economy. When those factors are taken into account, the largest tax increases were those imposed to help pay for World War II -- back when the U.S. raised additional revenue to pay for wars instead of simply borrowing.

Nevertheless, it is an exaggeration that has proved too tempting for top Republicans in Congress:

• "Any sudden tax hike would hurt our economy, so this fall -- before the election -- the House of Representatives will vote to stop the largest tax increase in American history," House Speaker John Boehner (R-Ohio) said in a May 15 speech in Washington.

• "Before we leave for August, I expect to schedule a vote on legislation preventing the largest tax increase in history," House Majority Leader Eric Cantor (R-Va.) wrote in a recent memo to fellow House Republicans.

• "Millions are unemployed and millions more are underemployed and the country is facing the largest tax hike in history at the end of the year," Senate Republican Leader Mitch McConnell said Thursday in a speech on the Senate floor.

• "This would be, without any exaggeration, the largest tax increase in American history," said a May 17 letter from 41 Republican senators to Senate Majority Leader Harry Reid (D-Nev.).

Republican presidential candidate Mitt Romney gives the claim a different twist, applying it to President Barack Obama's budget proposal for next year. That's an even bigger exaggeration.

THE FACTS: A huge collection of tax cuts are scheduled to expire at the end of the year, affecting families at every income level and businesses of many stripes. Many of the tax cuts were first enacted under former President George W. Bush and extended under Obama.

If Congress does nothing, income tax rates would go up, estate taxes and investment taxes would increase and the alternative minimum tax would hit millions of middle-income people. A temporary payroll tax cut that has been of benefit to nearly every wage earner in 2011 and 2012 would expire, costing the average family an additional $1,000 a year.

In addition, dozens of other tax breaks for businesses and individuals that are routinely renewed each year already expired at the end of 2011. Congress was expected to renew many of them by January, so taxpayers could still claim them on their 2012 tax returns.

If Congress fails to act, businesses would lose a popular tax credit for research and development as well as generous tax breaks for investing in new plants and equipment. Individuals would lose federal tax breaks for paying local sales taxes, buying energy efficient appliances and using mass transit.

In all, federal taxes would increase by about $423 billion next year, according to figures from the nonpartisan Congressional Budget Office and the Joint Committee on Taxation, the official scorekeepers for Congress.

Combined with federal spending cuts scheduled to take effect next year, the one-two punch would probably send the U.S. economy back into recession, according to a recent CBO study.

Still, the tax increases would pale in comparison to those imposed to help finance World War II.

Before the 1940s, the individual income tax applied to only a small percentage of the population. By the end of war, the income tax was levied on most working people, with a top tax rate of 94% on income above $200,000.

By comparison, the current top rate is 35%, on taxable income above $388,350. If Congress does nothing, the top rate would return to 39.6% next year -- the same rate that was in place for most of the 1990s.

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In dollars, next year's tax hikes would be the biggest. But the size of the economy is 80 times bigger than it was in the 1940s, which is why economists usually measure taxes and government spending as a share of the U.S. economy.

The 1942 tax increase represented more than 5% of the U.S. economy, as measured by the gross domestic product, or GDP. The 1941 tax increase was 2.2% of GDP, according to a Treasury Department paper published in 2006.

Next year's looming tax increase would represent 2.6% of GDP -- a huge tax hike but not the biggest.

Measured another way, the 1942 tax hike increased federal revenue by a whopping 71%, according to the Treasury Department paper. The 1941 tax hike increased federal revenue by 32%.

By comparison, next year's potential tax hike would increase federal revenues by 16%, according to CBO.

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ROMNEY: "President Obama has failed to even pass a budget. In February, he put forward a proposal that included the largest tax increase in history, and still left our national debt spiraling out of control, and the House rejected it unanimously," Romney said in an April 4 speech to newspaper executives and editors.

ROMNEY AGAIN: "Rapidly rising federal spending and debt threatens our economic future, and the president has responded by proposing the largest tax increase in history," Romney said in a Feb. 22 release.

THE FACTS: Obama's budget proposal would represent one of the largest tax increases since World War II, if you count letting the payroll tax cut expire as a tax increase. But again, it wouldn't be the largest ever. Obama's 2013 budget proposal mixes tax cuts designed to improve the economy with long-term tax increases aimed at reducing the federal budget deficit.

Obama has proposed extending Bush-era tax cuts for families making less than $250,000 and ending them for families that make more. He would end tax breaks for oil and gas companies but make permanent the research and development tax credit.

In 2013, Obama's budget proposal would increase tax revenue by $195 billion over current policy -- if you include the tax increase from letting the payroll tax cut expire. The tax increase would represent 1.2% of GDP. Or, measured a different way, it would increase tax revenue by 7%.

If you think Romney and Gingrich disagree about undocumented immigrants, their tax returns suggest that they're polar opposites when it comes to investing in municipal bonds to earn tax-free interest.

The former speaker's 2010 return shows he earned $10,754 of tax-free interest, compared to $26,655 of the taxable variety. Romney's forms show just $557 of tax-free interest and $3,295,727 of taxable interest income.

Remember, to figure the taxable-equivalent yield of a tax-free bond, divide the tax-free yield by 1 minus your marginal tax rate. Since Gingrich's marginal rate is 35%, a 3.5% tax-free yield is worth the same as a 5.38% taxable yield (3.5/0.65). Romney was hit by the alternative minimum tax in 2010, so his marginal rate was 28%. Avoiding a 28% tax makes a 3.5% tax-free rate equal to a 4.86% taxable yield (3.5/0.72).

When you buy your principal residence, points you pay to get your mortgage are fully deductible on your tax return for the year you close. When it comes to a second home (or a rental property or a refinancing), however, that cost must be amortized over the life of the loan -- 1/30th a year if you have a 30-year mortgage, for example. That can lead to relatively small -- and relatively easy-to-forget -- write offs.

But if you follow Gingrich's example, you won't miss this tax break. His return shows a $19 deduction for a portion of the $2,261 it cost him to refinance the mortgage on a rental property he owns in Whitehall, Wisc. Since the refi was in October, 2010, he got to write off one-fourth of 1/30th of the cost on that year's return.

Anyone planning a substantial charitable gift this year should take a page from Romney's playbook and consider donating appreciated securities rather than cash.

As long as you have owned the asset for more than a year, you get to deduct the full fair market value of the gift, not what you paid for it. (And neither you nor the charity ever has to pay tax on the appreciation that accrued while you owned the stock.)

Romney's 2010 return shows that he and his wife, Ann, donated $1,525,167 in cash and another $1,458,807 in non-cash gifts -- much of it appreciated stock in Domino's Pizza.

Even if you don't itemize deductions, you can write off alimony paid to an ex-spouse ... as long as you also include the ex's Social Security number so the IRScan make sure he or she reports the amount as taxable income. Gingrich fulfilled that requirement and deducted the $19,800 he paid his ex-wife in 2010.

Tax law allows you to deduct the loss on a stock that becomes worthless, treating it as though you sold it for $0 at the end of the year in which it lost all value. That appears to have happened to at least one of Mitt Romney's investments. His return shows a $63,511 loss on shares in an investment fund that were disposed of for $0.

The stock market meltdown of 2007-2009 was not kind to Mitt Romney. He suffered losses so serious that, even after wiping out all of his capital gains, he carried $4,844,089 of long-term losses over to his 2010 tax return.

Remember, losses are used to offset gains dollar for dollar, but then only $3,000 of excess loss can be deducted against other kinds of income such as salary or interest income. Any excess is carried over to the next year. On his 2010 return, Romney used nearly $5 million of such losses to offset gains that would have otherwise been taxed at 15%, saving him $726,613.

If you had carryover losses on your 2010 return (as the Gingriches did), be sure to revive them when you complete your Schedule D this spring.

Congress has created special rules for what it calls "passive activities," a group that includes most investments in real estate and limited-partnerships.

Basically, losses from such investments can only be deducted against gains from similar activities. There's an exception that allows up to $25,000 of loss from rental real estate to be deducted if you are "actively" involved in the rental.

We don't know if Gingrich is actively involved in the rental in Wisconsin, but even if he was, he would not have been permitted to deduct the $4,646 loss he reported. The $25,000 allowance gradually disappears as adjusted gross income moves between $100,000 and $150,000. With AGIof $3,142,066, Gingrich is out of luck. (He can stockpile the disallowed loss and deduct it when he sells the property.) By the way, the Romneys return shows that the passive loss rule blocked the deduction of over $2 million in losses from limited partnerships.

Plenty of politicians have gotten in trouble in the past for failing to pay Social Security taxes for their child-care providers and household help. For 2012, if you pay household help more than $1,800, you are required to file a Schedule H with your return and pay Social Security and Medicare taxes for your employee.

Both Romney and Gingrich included the form and paid the piper for their household help in 2010. Ann Romney reported that she paid four household employees a total of $20,603 in 2010 and paid $3,152 in taxes for them. Gingrich reported that he paid household help $14,774 and paid $2,260 in Social Security and Medicare tax.

The federal income tax is on a pay-as-you-earn system. If you don't pay in enough during the year -- via withholding from paychecks or estimated tax payments -- the IRSwill slap on an underpayment penalty. Generally, you avoid the penalty if your payments during the year are at least 90% of what you owe. Gingrich owed an extra $382,734 when he filed his $2010 return, 38% of his tax bill for the year. That triggered an underpayment penalty of $1,543.

The opposite side of the coin from the underpayment penalty is paying in too much doing the year. About 75% of all taxpayers are in this boat, and get tax refunds every spring. We think that's silly, and have a calculator to help you match withholding from your paychecks to what you'll owe for the year. Our calculator won't help Romney, though, since he has no wages from which to withhold. He overpays via quarterly estimated tax payments, and boy does he overpay! His 2010 return shows that he paid in $1,609,441 more than the $3,009,766 that he owed. He didn't ask for a refund, though. He let the IRSkeep the cash as a down payment on his 2011 tax bill.

For 2010, the 6.2% employee share of the Social Security tax applied to the first $106,800 of wages. (The wage base is $110,100 for 2012; the rate is 4.2% for January and February and will jump back to 6.2% if Congress fails to extend the payroll tax holiday.) If you work more than one job and your combined salary exceeds the wage base, too much tax will be withheld from your pay. That happened to one of the Gingriches in 2010, so they claimed a credit of $367 to reclaim the excess tax withheld.

A special rule allows qualifying self-employed workers to deduct 100% of their medical insurance premiums, even if they don't itemize deductions. That might have helped Romney, who reported that he paid $14,176 in self-employed health insurance premiums in 2010. But he didn't get the tax break. Rather than claim the special deduction, Romney reported the premiums as medical expense on Schedule A, where a deduction is allowed only to the extent such expenses exceed 7.5% of adjusted gross income. Romney's $14,176 of premiums fell well short of $1,623,488 (7.5% of his AGI).

That would rank as the fourth-largest tax increase since World War II, behind tax hikes enacted in 1950, 1951 and 1968, according to the Treasury Department paper.

Further dousing Romney's claim, House Republicans have passed a budget for next year -- which Romney has embraced -- that would raise just $7 billion less in taxes than Obama's budget in 2013. That's the equivalent of a rounding error, when you're talking about revenues of $2.7 trillion.

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The Affordable Care Act put in place significant tax-related programs that impact Medicare and Medicaid, such as increased Medicare taxes on earned and unearned income for high-wage earners, and Medicaid changes that increase the number of insured individuals. Establishing whether you are affected by the ACA-imposed taxes, or are eligible for certain health programs that fall under the Centers for Medicare and Medicaid Services, is determined by filing your income tax.

There?s a fine line between looking to save money on your taxes and taking deductions that will raise eyebrows at the Internal Revenue Service. Some taxpayers are tripped up by expenses that they assume are tax deductions, but don?t qualify under IRS guidelines. Here are a dozen items that can lead to unpleasant surprises in case of an audit.

The Affordable Care Act (ACA), also referred to as Obamacare, affects how millions of Americans will prepare their taxes in the new year. The law now includes penalties for all who haven?t obtained health insurance -- and those penalties are expected to be paid at tax time. The ACA also provides tax credits to help people pay for insurance, and you can claim those credits when you file your taxes. The Internal Revenue Service (IRS) has introduced a number of tax forms to accommodate the ACA.

The Affordable Care Act, also known as Obamacare, requires most Americans to have health insurance that meets a government standard known as "minimum essential coverage," or MEC. Whether your insurance qualifies as MEC depends not on the plan itself, but on how you obtained your coverage.

In 2014 the Affordable Health Care Act, also known as Obamacare, introduced three new tax forms relevant to individuals, employers and health insurance providers. They are forms 1095-A, 1095-B and 1095-C. These forms help determine if you need to comply with the new shared responsibility payment, the fee you might have to pay if you don't have health insurance. For individuals who bought insurance through the health care marketplace, this information will help to determine whether you are able to receive an additional premium tax credit or have to pay some back.

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fourskies

What a biased piece of rag reporting! This whole article is an exaggeration. It mentions nothing about the large amount of hidden taxes imposed by obamacare (like 2.3 % on medical equipment and supplies; penalties for not joining obamacare; reduction of pre-tax HSA funds from $5,000 to $2,500; etc, etc.) Yes, the Supreme Court approved it, but only by calling it what it was - a TAX. The article also doesn't mention the 1/2 trillion stolen from Medicare to fund Obamacare - i.e. taxes we payed in the past. And give me a break - the best argument this writer can muster is that WW II taxes were higher? What, we shouldn't have spent every penny we had to prevent world fascism? (Elect BO again, America, and we'll have our own fascist - maybe we should add all the WW II taxes to the pot in that case?) Hack articles like this try to get us to loose track of the basic facts we all know to be true - 1. The govt. doesn't spend or create its own money, it spends ours. 2. The more it gets the more it will spend. 3. The out-of-control deficit has to be reduced. 4. Raising ANY taxes, i.e. giving the govt more money, and reducing the deficit are total opposites. That is the GOP and Romney's message!

What a biased piece of rag reporting! This whole article is an exaggeration. It mentions nothing about the large amount of hidden taxes imposed by obamacare (like 2.3 % on medical equipment and supplies; penalties for not joining obamacare; reduction of pre-tax HSA funds from $5,000 to $2,500; etc, etc.) Yes, the Supreme Court approved it, but only by calling it what it was - a TAX. The article also doesn't mention the 1/2 trillion stolen from Medicare to fund Obamacare - i.e. taxes we payed in the past. And give me a break - the best argument this writer can muster is that WW II taxes were higher? What, we shouldn't have spent every penny we had to prevent world fascism? (Elect BO again, America, and we'll have our own fascist - maybe we should add all the WW II taxes to the pot in that case?) Hack articles like this try to get us to loose track of the basic facts we all know to be true - 1. The govt. doesn't spend or create its own money, it spends ours. 2. The more it gets the more it will spend. 3. The out-of-control deficit has to be reduced. 4. Raising ANY taxes, i.e. giving the govt more money, and reducing the deficit are total opposites. That is the GOP and Romney's message!

Interesting the liberals are arguing that the tax increase is not the largest in history. So what? It's still backbreaking under the present bad economy and large unemployment numbers. The liberal policy is to not address a problem just make it look less bad which, in their minds, solves the problem. The private sector is doing fine, problem solved.

Christian fundamentalists take the Bible quite literally. The fact that the Bible often contradicts itself, & that it has, in general, been shown to be a highly dubious document, is irrelevant to these fundamentalists; perhaps their mental condition, or lack of intelligence, allows for these problems to exist in the minds of fundamentalists without causing severe cognitive dissonance.

It is a sad fact that these fundamentalists have taken control of the GOP, & in spite of great strides made by the enlightened founding fathers, are trying to insinuate their religious doctrine into the political sphere. When these points are considered, is it any wonder that lies & deception should be foremost among the GOP's tactics?

"In dollars,next year's tax hikes would be the biggest. But the size of the economy is 80 times bigger than it was in the 1940s, which is why economists usually measure taxes and government spending as a share of the U.S. economy.""Combined with federal spending cuts scheduled to take effect next year, the one-two punch would probably send the U.S. economy back into recession, according to a recent CBO study."

So this is how: "GOP Wildly Exaggerates Size of Looming Tax Hikes" according to Associated Press

Probably just an oversight, but Stephen forgot to mention that Obama's budget, his third such budget that received zero votes in Congress would increase our national debt to $26T in just 10 years (according to the CBO). That would result in about $1B per day in interest on the debt. Oh, another "fact"....... the interest we pay China on our debt pays for their military.

The Debt is bad.. But your lies are greater......................................President Obama’s budget would pile up an additional $3.5 trillion in debt over the next 10 years and shows the government’s trust funds running out of money in 2020, Congress’s official non-partisan scorekeeper said Friday.

In 2012 alone Mr. Obama’s budget would leave a $1.3 trillion deficit — $82 billion worse than if none of his policies were enacted. Over the next ten years the deficit would dip to less than a half-trillion dollars in 2017, but would rise again in the later years.

By 2022, a decade from now, the federal government would spend $5.6 trillion and take in $4.9 trillion in revenue — both figures far outstripping today’s levels.http://www.washingtontimes.com/news/2012/mar/16/cbo-obama-budget-deepens-debt-35-trillion/

I think if they could cut the bugdet so that they could buy back debt, people would agree to the higher taxes. Until our government can figure out how to stop waisting billions of $s, I don't want to give them any more of my $s to waist.

As I have said many many many times...republicans politicians cannot, nor will they ever speak the truth about anything....not about themselves...not about President Obama or any Democrat...not about the big businesses being the enemy of this great Nation..NOTHING!! But as long as they continue to have deaf dumb brainless and blind voters swallowing thier every lie as truth...this great country is doomed. Republicans started it's destruction under GWB and they will simply pick up where he left off when he left office to finish the job. They have already accomplished additional damage to this country by putting tea party "cave men & women" into the house and senate to prevent President Obama from carrying out any of his committments to the voters and they did it blatantly on TV so that all could witness it.........only those who WANT the destruction to continue would ever consider voting republican again.........Re-elect President Obam in 2012....the only truly patriotic, christian man with the intelligence to bring the USA back to it's greatness!!